Creating Powerful Brands. Malcolm McDonald and Leslie de Chernatony. Theme of the Book

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1 Malcolm McDonald and Leslie de Chernatony Butterworth Heinemann, September 2003, 496 pages ISBN Theme of the Book A thorough and practical analysis of the essential elements of branding, giving coverage of the fundamentals of brand management, grounded in practical applications and underpinned by theory and valuable frameworks. Key Learning Points The reader will gain an overview of: The core characteristics of brands and the factors that influence their growth. The characteristics of effective brand management in diverse sectorsconsumer, business to business and service marketing. Techniques to win the competitive branding battle and evaluate brand success.

2 Part One: Foundations of Brand Management An overview of the nature of brands, their evolution, different types of brands and the forces that shape our choices. The core characteristics of brands and what influences their growth. Why it is important to create and sustain powerful brands. a product or service is a problem solver Brand is of particular...not just a product, but a relationship with the customer. importance as it identifies a product and offers sustainable advantage. Brand is about: strategy based on its position in the portfolio; positioning what it does and what it competes with; personality sensual, rational and emotional appeal. Successful brands generate significant value to the company, due to the sustainable quality of relationships with customers. Neglect the brand and products degenerate into commodities, with customers selecting on the core functionality and price being the main factor. In order to plan and implement brand success there needs to be an examination of the brand process itself. Successful branding is more than just the use of a name or logo, you need to understand the concept of the brand, brand characteristics and the role of brands in relationship marketing. To help understand this there is benefit in gaining a historical understanding of the evolution of brands, distributors of brands and generics, and also ways of categorising groups. The benefit of brands to manufacturers, distributors and buyers is also explained, plus the mechanics of brand planning and insight into the potential of a brand and how to influence its success. values are a powerful force influencing the behaviour of people Consumers look to brands not only for what they can do, but also to help say something about themselves to their peer group. Knowledge Interchange Book Summaries October 2009 Cranfield University 2

3 Part Two: Brand Management in Different Sectors How effective brand management differs in diverse sectors. How consumers choose brands and in consequence how managers can influence the consumer s choice of brands. Any understanding of brands needs a grasp of the psychological and social aspects of consumer brands, with an insight into their symbolic nature, the importance of values and their expression through brand personality and its enactment through relationships. The book makes a distinction between consumer and business to business brands. But set within the context of the importance of value, brands as relationship builders and the importance of emotion in the whole process. Service brands are also outlined indicating the issues which are essential to building them. The power of retailers is also discussed and how retailer brands have blossomed in an era of category management and efficient consumer response analysis. Strategies for growth, either as a supplier to retail brands, or as a manufacturer's brand are addressed. How consumers choose brands The starting point in understanding brand selection is to look at how consumers process information and the extent to which consumers perceive competing brands to differ, and their involvement in the brand purchase. Knowledge Interchange Book Summaries October 2009 Cranfield University 3

4 How much do you know about consumers perceptions of your brands? Typology of consumer decision processes Four buying processes can be identified. An appreciation of the extent of consumers involvement in a purchase decision and the perception of the degree of differentiation can be portrayed in the decision process matrix. High involvement and significant brand differences are typical of high value items, low consumer involvement and minor perceived brand differences are typical of commonly purchased low value items. Given this matrix, it is possible to discern consumers buying processes, and for the marketer to develop brands and added values. It is important to consider how customers choose brands, according to their needs, so that they have brand repertoires in each product category. Through recognising that different consumers offer different patterns of behaviour, profit opportunities in product categories arise from the use of differential brand marketing. Consumers search using information about a brand and this process needs to be understood and its limitations. Knowledge Interchange Book Summaries October 2009 Cranfield University 4

5 There is a case for giving consumers only a limited amount of highquality brand information based on a clear understanding of how consumers evaluate brands, with the brand name emerging. Perception of branding is examined, plus the role of brand name and meaning, along with the way brands can be presented as risk reducing devices for the consumer. Consumer brands satisfy social and psychological needs and there needs to be considerable insight into this. When consumers buy brands, they are not just focusing on their functional capabilities. Consumers look to brand to enable them to communicate something about themselves and also to understand the people around them better and the image surrounding the brand. There are important symbolic roles played by brands, so it is important to gain insight into what brands mean for consumers. Understanding self concept theory will help explain how consumers seek brands with images that match their own self-image. A model is presented of the way consumers select brands and how consumers choose brands to project images of themselves appropriate to different situations. Personal values influence the selection of brand, and brand personification is a means for consumers to judge brands easily. Business to business branding Organizational marketers who think that brands have no role to play are ignoring a powerful tool. Business to business branding has additional and different dimensions from consumer branding. Brands play as important a role in business to business as they do in consumer markets. The nature of brand equity needs to be addressed. The importance of value in industrial brands should be assessed, focusing on tangible and intangible components of aspects of brand performance. There are rational and emotional factors affecting brand choice just as there are with consumer branding they are the main routes by which buyers are influenced by sellers. Branding plays just as important a role in business to business marketing as Knowledge Interchange Book Summaries October 2009 Cranfield University 5

6 consumer marketing: emotion plays a part, but also buyers seek performance insurance. Business buyers are influenced by emotional factors such as the prestige associated with specific brands. Organisational brands been found to have notable brand equity, with organisational buyers exhibiting brand equity behaviours, for example they are willing to pay a price premium and recommend the brand to others. This does not mean that organisational decisions are solely impacted by brand, and under certain conditions some organisations will be less receptive to brand. The service sector and brands The service sector is also receptive to all employees must deliver the service in a brands: the creation and development of way which is consistent with the brand promise powerful service brands has become increasingly important. It is important to understand the difference between goods and service branding and how the fast moving consumer goods (FMCG) sector differs from branding services in its approach. Employees and customers are intertwined in the delivery of service brands, so that these roles need to be strategically designed to strengthen service brands. Case studies in the insurance and financial services sectors illustrate how strong service brands can be developed through adjusting the traditional FMCG branding model to the service sector. Branding in the service sector requires a fine tuning of existing branding knowledge, rather than creating whole new theories. Since every service is based on a series of performances, service brands run the risk of being perceived as commodities. To overcome this problem, service brands need to be made tangible to provide consumers with a favourable set of perceptions. It can also be used to inform staff and consumers about their expected roles and to differentiate the service brand. All employees represent their organisation in the consumer s eyes and they can influence the service brand. The participation of consumers can play an important part in building service brands. Knowledge Interchange Book Summaries October 2009 Cranfield University 6

7 Branding and retailers Branding is also influenced by retailers-for example, own labels have become increasingly important. A brand strength/ retailer attractiveness matrix is presented as a device to prioritise the effort behind different brands being sold to specific major accounts. Some of the strategies manufacturers can implement to develop and defend strong brands are outlined. The repertoire of branding techniques employed by retailers uses strategic marketing in the same way formerly only used by blue-chip brand manufacturers. Manufacturers need to adopt a more proactive approach to brand marketing in the retailer dominated environments. Internet branding through being far more attentive to evolving needs and responding faster, brands will continue to thrive on the internet Internet branding has required a new mindset from traditional strategies. Whilst a brand is a brand, regardless of its environment, where Internet brands are different is the way the brand promise is executed. The coherence of the brand can be assessed and the extent to which its brand triangle is reflected in the experience of its visitors. The Internet offers the opportunity to extend the brand relationship, through tailoring offerings and giving greater interactivity. Comparison shopping brands can be regarded as a further mechanism for encouraging firms to develop more value from their brands and to openly communicate their advantages. Brands will always be under pressure on price, offering good value and pricing strategies to achieve their goals. Knowledge Interchange Book Summaries October 2009 Cranfield University 7

8 Part Three: Winning the Brands Battle Really successful companies adopt a holistic perspective by regarding their brands as strategic devices. Money spent on developing the market position of the brand is in fact an investment to generate future revenues Brand building and retention involves planning to ensure consistent brand values over time, adopting a holistic perspective. Competitive positioning needs to be understood to sustain brands against competitors. There are two broad types of brand competitive advantage, cost driven or valueadded, and value chain analysis can help to identify the sources of competitive advantage. Strategies for developing different brands in relation to the competition are reviewed. Winning brands have certain characteristics and a structured approach to brand extensions is outlined. Through the analysis of environmental opportunities and threats, and the nature of the brand s competitive advantage, marketers are able to develop strategies which position their brands. The lifespan of brands will depend on the sustainability of competitive advantage. Knowledge Interchange Book Summaries October 2009 Cranfield University 8

9 The broad competitive advantages inherent in successful brands are based on either delivering similar benefits more cheaply than competitors, ie cost driven brands, and/or delivering superior benefits than competitors at a price premium, ie value-added brands. A useful device for identifying the competitive advantages of particular brands is the framework of Porter s value chain. Porter s generic strategies matrix identifies two dimensions of competition cost and differentiation. In a commodity market a company can lead only on lowest cost. In a differentiated market, achieving low relative cost gives the company market advantage and a high relative cost demands a niche marketing strategy. A more advanced method developed for brand strategy is to consider the type of competitive advantage inherent in the brand and the competitive scope of the market it will be targeting. The profitability of a brand will come from a long-term brand investment programme based on the factors that drive brand success and profitability. Brand Added Values In developing, sustaining and adding values to the brand, there is a challenge in doing so successfully. Added value as being a feeling Any marketing activity needs to integrate these added consumers have that the brand offers move than competitors, values and present brands in a holistic way. This regardless of whether the feeling is means all, rather than one single aspect of the brand s based on real or perceived issues assets being developed. One way of identifying possible added values for brands is to consider a four level model of a brand: as a generic product or basic service with the expected, augmented and potential brand surround. Using this conceptual model you can develop brands in both product and service sectors. To sustain the added values of a brand against imitation, trademark registration is required. Counterfeiting however is just one of the challenges facing brand imitation. The success of brands is based on their added values which are relevant to the target markets. A strong personality of a brand can be a valuable means to add value. Over time, competitive activity and consumers seeking variety mean new Knowledge Interchange Book Summaries October 2009 Cranfield University 9

10 added values will be required to push the brand to the potential level. Once at the potential level, a time will be reached when consumers become disenchanted with the brand. If brand augmentation is successful competitors may try to develop related, similar versions. Brand planning is an important aspect of strategic brand management. Consumers welcome consistency and therefore the brand s core values need to be understood and not meddled with lightly. It is therefore important that the values of the brand are understood and how these blend together to form a holistic brand. Some of the issues in developing and launching new brands need to be considered. Equally, mature brand management is important throughout the life cycle of that brand, from growth, maturity to decline. Core values need to be communicated to all the people working on the brand and any differing perceptions amongst the brand team need to be both identified and addressed. Marketers need to understand the evaluations that consumers use to judge their brand, and this understanding leads to a more holistic brand identity and a clear positioning. Two broad dimensions are apparent when consumers choose brands. For any given product it is possible to evaluate the extent to which different brands satisfy functional and representational needs, and they can be plotted against competing brands on a functional/representational matrix. Investment strategies to sustain the brands can then be developed using this matrix. First to market advantage with a new brand offers distinctive benefits. As the brand starts to grow it should be reinforced so that consumers recognise exactly what the brand represents and in which functional situations it is particularly effective. Knowledge Interchange Book Summaries October 2009 Cranfield University 10

11 Brand evaluation Brand equity growth is achieved by building on four elements: differentiation, relevance, esteem and familiarity It is very important that brand managers assess the state of health of their brands Brand evaluation is very important in order to understand how other products compare and therefore the dynamics of brand equity need to be considered and how best to grow brand equity. Evaluating the financial value of brands needs to be carried out. Before commencing the evaluation of a brand, managers need to be very clear about brand equity. Brand equity is evolutionary rather than static and therefore understanding the dynamics of a brand s equity enables managers to consider strategies to help grow their brands. Each component of brand equity needs to be considered and diagnostics about the well-being of the brand and indicators need to be chosen. The brand attributes components can be gauged from considering such characteristics as brand awareness, image, perceived quality, perceived value, brand personality and organisational association. While problems remain about putting financial measures on brand value, some tracking is necessary to pinpoint trends. This will provide the opportunity for maintaining the brand strengths and offer information to help grow the brand. And finally Successful brand building helps profitability by adding value that entices customers to buy And last but not least, they help transform organizations from being faceless bureaucracies to ones that are attractive to work for and deal with. Knowledge Interchange Book Summaries October 2009 Cranfield University 11

12 About the Authors Malcolm McDonald: Professor Malcolm McDonald is widely recognised as one of the world s authorities on marketing. He is Emeritus Professor of Marketing at Cranfield University and remains as energetic, creative and insightful as ever in the business arena, running many seminars and workshops, writing prolifically and consulting on a worldwide basis. Leslie de Chernatony: Professor Leslie de Chernatony is Honorary Professor of Brand Marketing at Birmingham Business School. Reflecting his international standing Leslie is Professor of Brand Marketing at Universita della Svizzera italiana, Lugano, Switzerland, Honorary Professor of Brand Marketing at Aston Business School, Aston University and Managing Partner at Brands Box Marketing and Research Consultancy. Knowledge Interchange Book Summaries October 2009 Cranfield University 12